Tax exemptions for Scout units
General
The following relates to UK tax legislation and does not apply within the Channel Islands, the Isle of Man or to British Scouting Overseas.
All Scout groups, districts, counties/Areas and Scottish regions (but not English Regions) are charities and thus can benefit from tax exemptions. However, some forms of income are not covered by the exemptions and may be taxable. Information is available on the HMRC website.
Investment income
Scout charities are exempt from UK tax on most types of investment income, including income from investments made overseas, as long as the income is used for charitable purposes only. This includes interest and dividend income as well as rents received.
Trading
Any profits that your charity makes from trading activities – selling goods and services to customers, including members – may be taxable. However, there are some important exemptions:
Where a charity carries on a trade as a means of fulfilling its charitable objectives the profits/surpluses are exempt from tax. Charging members to participate in activities and trips could be classed as ‘trading’, but if profits/surpluses arise, they are exempt from tax under the ’primary purpose’ trading exemption. This exemption extends to trading which is ancillary to the charitable objectives, including things such as the sale of uniform items. This exemption will cover the majority of regular scouting activities. More information is available on the HMRC website.
More information is available on the HMRC website.
If your youth members carry on a trade then the profits can be exempt provided they are used for the charitable purposes. In most cases the activity would already be exempt under one of the other categories.
The small trading exemption will often deal with any profits which do not fall into the exempt categories. If you have trading income which does not qualify for one of the other exemptions, then the profits will be exempt if the gross income (i.e. turnover before expenses are deducted) from activities which are not already exempt does not exceed £5,000. That limit applies where the gross annual income of the charity from all sources is under £20,000. If the charity has total income between £20,000 and £200,000 then the small trading exemption covers turnover up to 25% of the total income. The limit does not increase if total income is higher than £200,000. More information is available on the HMRC website.
Note: Any trading income that is exempt under the other categories is not brought into the reckoning when calculating the small trading exemption. To illustrate with an extreme example, you can have £300,000 income from camping trips, etc. which is exempt as ’primary purpose’ trading and still have a further £50,000 income not already exempt from tax treated as exempt under the ‘small trading’ exemption.
Fundraising events and lotteries
There is an exemption from tax for profits from fundraising events such as fairs, fetes, barbecues and barn dances. The exemption applies for VAT as well.
The detailed rules found on HMRC’s website refer only to VAT. If these conditions apply then as long as the profits are used for charitable purposes they will also be exempt from income and corporation tax.
If the same kind of event is held more than 15 times in a year in the same place, the exemption cannot apply for any of the events, not even the first 15.
Profits from lotteries organised by charities for fundraising purposes are exempt from tax as long as the lottery is promoted and conducted with a lottery operating licence, and all the proceeds are used for the charitable purposes of the charity.
Gift Aid
Information on Gift Aid can be found in the Support Scouts' pages.